Contracts Flashcards
What is an express contract?
Contract formed wholly by written and/or oral words.
Example: Purchasing a computer for $500.
What is an implied contract?
Contract arises due to circumstances between parties and their conduct.
Example: An owner brings their dog to the vet. The vet expects payment for services provided.
Example: Individual drops off W-2 and other tax documents to a tax preparer. It is implied that the accountant is to provide tax preparation services for this individual.
Example: You walk into a restaurant and eat. It is expected/implied that you will pay for your food.
What is a bilateral contract?
Contract where both sides make a promise.
Example: Performing a financial statement audit for a fee.
Example: Renting an apartment.
What is a unilateral contract?
Contract where one side makes a promise in exchange for an action or performance by the other side.
Example: Posting a flyer for a $5,000 award for finding a missing dog.
What is a void contract?
Contract is not enforceable as it is one for illegal purposes or one that violates law.
Example: An agreement to provide financial results to someone prior to that information becoming public (i.e. insider trading).
Example: Murder for hire
What is a voidable contract?
Contract can be set aside because one party has protection under law and thus has the right to opt out of the contract. (e.g. fraud, legal capacity)
Example: Picasso painting offered at $100,000 but knows the painting is a forgery. The purchaser can be relieved of liability under this contract.
Example: A 16 year old minor purchases a car from a car dealership with a fake ID. The minor has the choice of honoring the contract or disaffirming the contract.
Example: Someone purchased a building that was not up to building code compliance, but was told it was up to building code compliance. The contract is voidable.
What is an enforceable contract?
A valid contract.
What is an unenforceable contract?
Although courts will not enforce these contracts, the parties may still proceed with performance.
Example: Orally agreeing to purchase a property. Real estate purchase agreements must be in writing, as per Statute of Frauds, so this is not an enforceable contract by courts, however the parties of the contract are permitted to continue with the contract.
What is an executed contract?
Contract has been fully performed by both involved parties.
Example: Exchanging a watch for $250.
What is an executory contract?
Contract in which performance has not yet been fully performed.
Example: Parties agree to exchange watch for $250 but the exchange will happen in 10 days. When the exchange happens, the contract becomes executed.
What is a partially executed contract?
Contract where one party has performed their contractual obligation but the other side has not yet performed theirs.
Example: CPA performed a financial statement audit of a Company ABC, but Company ABC has not yet paid.
What is a quasi-contract?
Contract imposed by courts or by law when some performance has gone forward, or there was a great deal of reliance, even though there is no express or implied contract. This contract could be imposed by courts if there is unjust enrichment of one party by the other.
Example: Political campaign staff member orders 500 posters for her candidate at a copy center. The candidate resigns from the campaign. The campaign staff refuses to pay since the candidate resigned. This would be unjust for the copy center and a quasi-contract could be formed.
What is required for contract formation?
Offer
Acceptance
Consideration
Writing (depending on type of contract)
What is an option contract under common law?
Offer related to a potential contract that is a separate contract for time.
Example: Seller offers land to a school but school is unsure if they’d like to purchase it. The school offers $5,000 to seller to keep option open for 6 months. If seller accepts, an option contract has been created.
What are the 3 rules of an option contract under common law?
The offeror cannot withdraw the offer during the option period.
The offeree has the right to accept the offer during the option period but is not required to accept.
The offeree has the right to reject the offer during the option period, however the offeror is required to still keep the option open for the entire option period.
